If you are a long term investor, you tend to always make returns in equities. In fact, equity shares have known to outperform other asset classes in the long term. We have selected a few stocks that offer great opportunities for long term investors. These include stocks that have a very low debt to equity ratio and which have shown good growth over the years. These stocks have the tremendous potential to generate money in the long term. We are recommending select banking stocks as our long term picks, as we firmly believe that the NPA worries are now behind.
Here are a few stocks that are from sectors such as mining and banking.
MOIL is a government owned company that is engaged in the mining of manganese ore. The prices of Manganese have been on a rise in the last few months. In fact, in FY 2018, the company recorded the highest ever turnover as volumes increased and also realizations.
There are a number of reasons to be buying the MOIL stock. The company is a solid cash generating business that is also debt free. It is also looking at gradually expanding its mining capacity.
In FY 2018, MOIL recorded a production of 1.2 MT and by 2021, it plans to almost double the mining capacity to 2.5 MT. MOIL is a leader in manganese ore has solid cash reserves and a dominant position in the market.
MOIL is also looking at a ferro alloys plant that will be internally funded.
Good financials from MOIL
The company's business is almost risk free, as is the case with all mining companies. Demand for manganese also is robust, as steel continues to record good growth.
For the quarter ending Sept, 2018, MOIL reported a net profit of Rs 105 crores on a revenue of Rs 357 crores. The EPS reported was Rs 4.08 for the said quarter. We believe the company can do an EPS of Rs 18 for FY 2018-19.
By 2020-21, the company may report an EPS of Rs 22 at least, riding on its expansion plans. This makes the stock attractive at the current market price of Rs 169.20.
In fact, if one is ready to hold the stock for a couple of years, we believe that it is possible to get solid returns.
Jammu and Kashmir Bank
Jammu and Kashmir Bank is probably one of the cheapest banking stocks to own from the private sector space. The stock has fallen from levels of Rs 95 to the current levels of Rs 39. In fact, the stock is very close to its 52-week low of Rs 35.80.
The bank has a very dominant share in its home state of Jammu and Kashmir, with 85 per cent of its deposit from the home state. This protects the bank from interest rate competition with other banks to a certain extent.
Over the last few years, Jammu and Kashmir Bank has managed to improve its net interest margins to 4 per cent, from the earlier three per cent.
Jammu and Kashmir Bank: Non performing assets to moderate
Jammu and Kahsmir Bank reported a much improved performance for the quarter ending Sept 30, 2018. Net Profit was placed at Rs 93.75 crores, during the period, as compared to a net profit of Rs 71.60 crores for the quarter ending Sept 30, 2017.
We believe that there is a full possibility that non performing assets would moderate in the coming quarters as revival in the J&K economy takes place.
If you see the stock is currently trading below book value and the bank has a very small equity capital of around Rs 55.70 crores. This means a slight revival in the fortunes of the bank could send the stock soaring. The price to book value of the bank is also at a very decent 0.45 times. The bank's shares have also halved in value over the last few months, which makes it an interesting pick at the current levels.
The bank can deliver an EPS of Rs 6 by 2018-19, which translates into a p/e of just over 7 times. A very cheap stock to buy for the long term.
Coal India: Great on dividend yields
The shares of Coal India have suddenly seen a sharp fall to almost a 52-week low of Rs 239 and have recovered marginally.
The company recently declared a dividend of Rs 7.50 per share and it is now available ex-dividend.
There are many reasons to buy Coal India. The first and the foremost reason is that we believe that the downside risk to the stock is limited, given its ability to declare solid dividends.
It is likely that we may see Coal India, declare a total dividend of at least Rs 19 per share for FY 2018-19. There are hopes that there would be one ore dividend in Feb 2019 of Rs 12 per share at the very least,
Let us assume you buy the stock at a price of Rs 240 and the firm declares a total dividend of Rs 19 per share. You get a dividend yield of near 8 per cent and that too tax free, up to Rs 10 lakhs dividend.
Coal India: Not too expensive
There are many other reasons to buy the shares of Coal India as well. The company is a cash rich company, with solid coal reserves.
It faces very limited business risks. The stock is also available at a price to earnings of less than 10 times, which makes it an attractive bet. With wage hikes now behind and e-auction prices expected to be much better, the shares of Coal India can jump in the coming days, especially as we draw closer to Feb, 2019.
With risk from elections rather high, it would be a good idea to bet on a stock like Coal India, which provides steady dividends.
South Indian Bank
South Indian Bank shares had crashed to a new 52-week low last month and have recovered since.
The bank reported a mediocre set of numbers for the quarter ending Sept 30, 2018. However, we believe that going ahead the bank may see its performance improve dramatically. What's most interesting is the fact that the bank has zero corporates, under its watch list on corporate loans. During FY 2018, the Current and Savings Account grew by 9 per cent, while net profits jumped 51 per cent to Rs 114 crores, from just Rs 76 crores.
South Indian Bank: Bright prospects for the longer term
The bank has laid out a strategy for long term growth. Accordingly, the bank will ensure more efficient branches for faster processing of loans, with a clear road map for mobilizing funds through CASA.
It will also increase its POS and ATM network. The bank will also lay an emphasis on housing finance, with a retail hub in Kochi. The SME loan book, which has grown rapidly, will see the appointment of a JGM for better coordination between the regions.
The bank reported an EPS of Rs 1.85 for FY 2017-18. Going ahead, it is possible that South Indian bank ends the year 2018-19, with an EPS of Rs 2.2 at the very least. This means the stock is currently valued at just 7 times one year forward earnings.
If you value the stock at even 15 times p/e, the stock should yield a decent return in the short to medium term. South Indian Bank is a good stock to own for the long term.
Best small cap stocks to buy
In the past some small cap and mid cap stocks have given excellent returns. In fact, small cap stocks have beaten returns from large cap stocks, which have made them excellent bets for the long and short term. Please click on the link to see some excellent small cap stocks ideas.
The article is not a solicitation to buy, sell in securities mentioned in the article. Greynium Information Technologies Pvt Ltd, its subsidiaries, associates and the author do not accept culpability for losses and/or damages arising based on information in this article. The author owns shares in Jammu and Kashmir Bank.